YELLOWKNIFE, N. W. T. -- In retrospect, the president and CEO of Tyhee Development (TDC-V, TYHJF-O), Dave Webb, says it was a mistake. Acting on the advice of a financial adviser, a few months before the markets had completely soured in late 2008, the company began to shut down its drills at its Yellowknife gold project. The idea at the time, one that many other juniors would subscribe to, was to hold onto any available cash so as to stay afloat while riding out the worsening economic storm.
That prudence, Webb says, came back to bite Tyhee as the gold market began surging in early 2009. Because Tyhee had quieted its drills so early on in 2008, well before the worst of the crisis hit, it had little news to release with which to entice investors by the time the market began to pick up again. Instead of an attractive gold prospect, Webb says investors saw in Tyhee a company bereft of news, one that looked to be on care and maintenance. "Why would I invest in that?" says Webb, paraphrasing the thinking of investors.
The end result is a share price that has been flat throughout 2009, hovering between 10¢ and 15¢, well below the 40¢-range Tyhee had traded at throughout much of the first half of 2008.
Yet while Tyhee has received relatively little notice by the markets, as became apparent during a visit this summer by The Northern Miner, the junior has been quietly and methodically at work exploring new and existing targets on the Yellowknife project while advancing a mine plan through permitting and towards a prefeasibility study due out in early 2010. In others words, Tyhee, though seemingly quiet on the wires, has in fact been making solid headway at its flagship property.
The company has put together a more than 160-sq.-km land package covering disparate portions of the southern half of the 100-km-long Yellowknife greenstone belt. This greenstone belt, striking northwest of the city of Yellowknife, is extensively exposed at surface over its southern half, where Tyhee operates. A homocline, dipping steeply to the east, the greenstone belt consists of metamorphosed rock, greenschist and amphibolite.
The heart of the Yellowknife project is the Ormsby and Nicholas Lake concessions, 45 km northeast of the city of Yellowknife. The 69.1-sq.-km property, which Tyhee consolidated in 2001, surrounds the historic Discovery gold mine, which produced just over 1 million oz. gold from just under 1 million tonnes of ore out of narrow quartz veins between 1950 and 1969. The mine closed a year after a fire destroyed its onsite mill in 1968.
Tyhee bought both the Ormsby property (which covers the Discovery mine) from GMD Resources, and the Nicholas property from Webb, in 2001. Building on extensive drilling and exploration around the Discovery mine by GMD and others, Tyhee ramped up a drilling campaign that would soon top more than 600 holes both from surface and underground using a decline that Tyhee extended to more than 900 metres in length.
Tyhee's drilling campaign and exploration work has ultimately led to a scoping study outlining an open-pit and underground mine with measured and indicated resources now over 1.8 million oz. gold around the historic Discovery mine. But it isn't a Discovery- type mine that Tyhee has been after.
Typically, previous explorers in the Yellowknife greenstone belt have been looking for the high-grade quartz vein targets that were the backbone of the mine industry in and around Yellowknife during its gold heyday. Standing beside a 6,800-tonne bulk sample extracted from Tyhee's decline at the Ormsby target, Tyhee's chief geologist for the Yellowknife project, Val Pratico, explains that Tyhee and, to some degree, GMD before it, have put aside preconceptions about where gold might lie in Yellowknife's greenstone belt.
"We left the old quartz concept behind," Pratico says. "That shrinkage stopage of quartz veins. Gold is, in fact, more highly disseminated in many other areas."
At Ormsby, a few kilometres south of the Discovery mine, those other areas lie in relatively quartz-poor ampibolite, or metamorphosed basalt. Quartz veins only make up about 5% of the Ormsby deposit and do not bear significant amounts of gold mineralization.
"It's not the typical schists you see in most Yellowknife deposits," Pratico says, kneeling down on an outcropping of Ormsby amphibolite.
But in large part due to careful examination of the Ormsby deposit underground from Tyhee's now-flooded decline, Tyhee has shown that extensive portions of the amphibolite, especially areas of brecciation, are gold-mineralized. Along with brecciation, which due to deformation is needle- like in design, one of the telltale signs of gold mineralization is coincidence of the pyrrhotite, an iron sulphide, in the 1-10% range.
Connecting these dots to gold mineralization has proved fruitful for Tyhee. Its last resource update in March 2009, pegged Ormsby's measured and indicated resource at 10.9 million tonnes grading 3.42 grams gold for just shy of 1.2 million contained ounces gold. Since the Ormsby resource makes up more than half of Tyhee's measured and indicated gold ounces, it is a central component of a mine plan the company is currently pushing from the scoping to prefeasibility study level. The prefeasibility study is fully funded by a recent $2.6-million financing.
The next most important component of Tyhee's exploration at the Yellowknife project, at least in terms of Tyhee's mine plan, is the Nicholas zone, about 10 km northeast of Ormsby. The Nicholas zone, which weighs in at 2.7 million measured and indicated tonnes grading 3.54 grams gold for 311,000 contained ounces gold, is quite a different geological beast than Ormsby or the Discovery mine for that matter.
Gold in the Nicholas zone is hosted in quartz sulphide veins within a small granodiorite plug. Sulphides, which run about 6%, include arsenopyrite, pyrite, pyrrhotite, galena and minor chalcopyrite. The main difference between the Nicholas and Ormsby zones is that the former sees gold hosted in a granitoid, while in the latter gold runs in metamorphic volcanics (amphibolite.)
"This is the lone granodiorite around here," Pratico says, standing near a closed portal to a now-flooded exploration decline that accesses the Nicholas deposit. "We've found virtually all the granodiorite has gold and sulphide mineralization. It's thoroughly mineralized."
The makings of a mine
The Ormsby and Nicholas deposits form the two main thrusts of Tyhee's mine plan at Yellowknife. The company released its initial plan just over a year ago in the form of a scoping study. The scoping study, which puts a $150-million price tag to capital costs including a 30% contingency, envisages a combination of open-pit and underground mining at both deposits. As laid out in 2008, the operation would see between 150 and 200 employees working a 3,000-tonne-per- day, fly-in mine with a seven-year mine life (not including additional resources from satellite deposits). Open-pit mining at Ormsby would cover the first three years, while the narrow Nicholas deposit would be mined by open pit for about the first two years (though Pratico now says Tyhee will likely drop the open-pit plan at Nicholas, mostly to forego the open-pit permitting process there).
With cash costs at about US$390 per oz. gold, gold recovery at 95%, and based on a US$750-per-oz. gold price, the project returned a net present value of $144 million discounted at 5% and an internal rate of return of 21.4%. Payback would come after four years.
As Tyhee's exploration camp does now, the mine would rely on an 80-km ice road as its supply route. For power, Tyhee would most likely connect to the Northwest Territories Power Corp.'s electrical grid at a capital cost of $24 million (a figure included in the $150 million). Tyhee could truck in diesel for onsite power generation, but the project's scoping study showed that while the option might be $2 million cheaper to build initially, it would cost significantly more to run. The scoping study pegged annual costs of grid-power at $8 million versus annual costs for fuel at $19.6 million. Electrical power would come from the Bluefish hydro dam about 40 km southwest.
Ore processing at Yellowknife would be a mix of gravity, for free gold, and flotation for the rest. Gold extraction would be achieved in carbon-in-leach tanks and recovery, based on initial metallurgical tests from Tyhee's bulk sampling, has been pegged at about 92%.
As for tailings, these would most likely be deposited underwater in nearby Winter Lake. Though dry land tailings could be considered, they might pose a greater environmental risk than underwater disposal. "Dry land tailings would present major problems for wind pollution," Pratico explains.
In terms of permitting, Tyhee is more than two years into the process. Though Pratico says there are "no stoppers perceived" on the permitting front, Dave Nickerson, a Tyhee director who was also a former chairman of the Northwest Territories Water Board and a federal member of parliament for the region, says that permitting won't occur overnight.
"In this area, we have to realize that the requisite process is slow." Nickerson says. He adds, however, that he doesn't believe there will likely be any "egregious prohibitions" levied against the project by the territorial government. Nickerson also says that he doesn't foresee substantial local opposition to the project by First Nation groups or others. The project is not close to any year-round communities and what's more, he says, First Nations in the area are familiar with both surface and underground mining.
Nickerson relates how many First Nations community members who have visited Tyhee's project remember the days when the Discovery mine was open. "They come out and say, 'Oh yeah, my dad worked on that mine,'" Nickerson says. "They have an understanding of what the mining industry is all about."
While Tyhee advances the Yellowknife project to the prefeasibility stage, it has also continued to grow the size of gold-mineralized targets -- potential satellite deposits -- beyond Ormsby and Nicholas. Chief among these is the 77.7-sq.-km Clan Lake property about 25 km southwest of Ormsby.
In an area Tyhee has named the Main zone, indicated resources stand at 2.5 million tonnes grading 3.12 grams gold per tonne for just over a quarter million contained ounces gold. The gold mineralization is a bit more typical of the Yellowknife greenstone belt in that it is largely hosted in quartz veins and in sericite halos adjacent to the veins. Though that resource estimate already makes a worthy satellite deposit to the Yellowknife project in the eyes of the company, what has the explorationist in Pratico and Webb even more excited is the increasing potential to expand mineralization in the Main zone and at other nearby targets.
As was the case for previous explorers at Ormsby and Nicholas, a focus on narrower geological structures led companies to overlook broader and more disseminated gold mineralization at Clan Lake. At the Main zone, for example, one previous operator in the 1960s excavated a sizable trench a couple metres across, a half-dozen metres long and several metres deep in the hope that it had discovered a high-grade quartz vein target.
Though a bulk sample reportedly graded 14.6 grams per tonne, in the late 1960s the size and grade of the target just wasn't enough. "People before us had focused on developing narrower parallel structures but never developed a larger deposit model," Pratico says. "Tyhee drilled it and got the sense that it was more than just two or three structures that were a couple metres across."
In fact, Tyhee is showing that what began as disparate zones of mineralization called the Pond and Cranberry zones are now coalescing into the Main zone. All told, the broader Main zone is 1.1 km long and 200 metres wide, making it four times larger than previously conceived. Not surprisingly, Tyhee plans to drill the expanded zone in the hopes of adding to the resource.
Beyond the Main zone, Tyhee is also having exploration success at the Cub and Morel zones, where three recent grab samples graded between 100 and 300 grams gold. Pratico also notes that in the southwestern portion of the Clan Lake property, amphibolite akin to that found at Ormsby has been identified. It is an open question at the moment whether it contains significant gold mineralization.
Finally, Tyhee is also finding gold mineralization between the Clan Lake and Ormsby/Nicholas properties on the 16.5-sq.-km Goodwin property. There, in the Vad zone, Tyhee has estimated an inferred resource of 971,000 tonnes grading 2.91 grams gold for 91,000 oz. gold.
As Tyhee generates drill-hole and sampling results in late 2009 and early 2010, Webb says he hopes investors will reconsider their impression of the company. And if, for example, Tyhee hits more of what it already has found at Clan Lake, with intercepts in the 20-metre range grading 5 grams gold or so, Webb expects the market will take notice.
"If the market isn't excited about that, well, then the market doesn't have a pulse," he says.
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